1 African Economic Outlook 3 The continent remains on a dynamic - - PowerPoint PPT Presentation

African Economic Outlook

“Africa is now the new frontier, an important growth pole for the economic recovery and an attractive business destination for capital. The perception gap is closing, and there are serious investors who are seriously interested in Africa. It is now Africa’s time!”

Ngozi Okonjo-Iweala Finance Minister of Nigeria, 2011

1

3

• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 2005 2006 2007 2008 2009 2010 2011 2012 Africa Eurozone USA Developing Asia* *Excludes Australia, Hong Kong, Japan, Korea, New Zealand, Singapore, Taiwan

The continent remains on a dynamic growth path

• 2%

0% 2% 4% 6% 8% 10% 2008 2009 2010 2011 2012

North Africa

• 2%

0% 2% 4% 6% 8% 10% 2008 2009 2010 2011 2012

West Africa

• 2%

0% 2% 4% 6% 8% 10% 2008 2009 2010 2011 2012

East Africa

• 2%

0% 2% 4% 6% 8% 10% 2008 2009 2010 2011 2012

Central Africa

• 2%

0% 2% 4% 6% 8% 10% 2008 2009 2010 2011 2012

Southern Africa

Source: AfDB and World Economic Outlook April 2013

 With GDP growth at 6.6 % in 2012, Africa demonstrated strong resilience to regional and external shocks  High commodity prices and export volumes, domestic demand and improved macroeconomic management have helped lift GDP  During 2002-2012, six of the world’s fifteen fastest-growing economies were in Africa Africa rising despite headwinds 4

Better macroeconomic management though disparities remain

• 10
• 5

5 10 2000 2003 2006 2009 2012

Fiscal balance

Oil-exporters Oil-importers % of GDP

• 10
• 5

5 10 15 20 2000 2003 2006 2009 2012

Current account

Oil-exporters Oil-importers % of GDP 0% 2% 4% 6% 8% 10% 12% 2000 2002 2004 2006 2008 2010 2012 10 20 30 40 50 60 70 2002 2004 2006 2008 2010 2012 Remittances ODA FDI USD billion

Inflationary pressures remain contained External flows reached a record high in 2012 Oil-exporting countries grew by 8.7% in 2012 while net oil-importers recorded a growth of 3.9% 5

Africa’s economic growth is more than a resource boom

Mining and quarrying Agriculture Wholesale & retail, restaurants, hotels Finance, insurance, real estate, etc Manufacturing Public administration and defense Transport and communications Construction Electricity, gas & water Other services

22% 17% 15% 11% 9% 9% 7% 5% 1% 4%

2012 GDP by sector

“Africa is once again being seen as a continent of

• pportunity—the last emerging investment frontier.

We see this optimism in the number and diversity of businesses and countries flocking to invest in the

• continent. It is an optimism based on strong

economic growth that even the global financial crisis was only able to reverse briefly. And increasingly, this growth is being used to diversify economies and invest in the bedrock of successful societies—in education, in health and in vital infrastructure.”

Kofi Annan Former Secretary-General

• f the United Nations, 2011

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Achieve universal primary education  Tremendous progress in net primary enrolment with average over 80%. 17 among 35 African countries had ratios above 90%  Issues of quality of education remain

Mixed scorecard on progress towards Millennium Development Goals

Promote gender equality and empower women  Good progress at primary level but weak parity at secondary and tertiary levels of education  High representation in parliament  Women’s empowerment shows a dynamic relationship with most other MDGs Ensure environmental sustainability  Emissions minimal for most countries  Most countries reduced usage of ozone-depleting substances by more than 50% Develop a global partnership for development  ODA is at historic highs but still short of commitments  HIPC initiative continued to reduce the debt burden

• f countries

 Access to affordable essential drugs still remains a challenge  Access to information and communications technology (ICT) is increasing Eradicate extreme poverty and hunger  Annual poverty declined by only 0.5% compared to 2.3% in East Asia and 1% in South Asia –insufficient rate despite Africa’s rapid economic growth in past decade Reduce child mortality  Declining, but slowly  Of the 26 countries worldwide with under-five mortality rates above 100 deaths per 1,000 live births in 2010, 24 are in Africa. Nevertheless, Africa doubled its average rate of reduction in child mortality in the last decade Combat HIV/AIDS, malaria and other diseases  HIV/AIDS on the decline, especially due to behavioral change and access to antiretroviral therapy  Funding cuts threaten progress on the HIV/ AIDS front Improve maternal health  Improving, but slowly  Maternal mortality is a result of a multitude of factors, including too few health services and providers, poor infrastructure and transport, and low empowerment

• f women

Source: MDG report 2012

946 Days of Action to accelerate momentum 31 Dec 2015 Sep 2000 UN Millennium Summit 29 May 2013 OFF TRACK 7 ON TRACK

Economic prospects remain promising

….but could be constrained by political and economic challenges

Domestic political instability Postponement of fiscal reforms Adverse weather conditions Sluggish global recovery Protracted industrial disputes

4.8% in 2013 5.3% in 2014

Moderate to high commodity prices Investments in energy, transport infrastructure, telecom and social services Expanding domestic demand Increasing South-South trade & investment Inflation is expected to remain in single digits 8

2 Financial Profile and Capital Market Activities

The financial position of the AfDB is very strong. Thanks to its solid capitalization, ample liquidity buffers and prudent risk-management framework the institution has the capacity to absorb potential shocks emanating from the turbulent operating environment. The Bank has substantial headroom in risk- bearing capacity to further expand its lending. Continued financial and operational prudence will remain key.

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Africa’s own triple A rated institution

We expect AFDB's liquidity to remain very strong and its high franchise value to increase, given the attention Africa is receiving from the international donor community. The bank’s equity-to-asset ratio is one of the strongest among regional Multilateral Development Banks. The ratings mainly reflect the strong support the Bank entails from its regional and non-regional member countries; its solid financial base; its prudent financial and risk management policies; and its status as a "preferred creditor". Very strong business profile reflects AfDB’s role and public policy mandate in lending to African governments and to public and private-sector entities in African countries.

11 January 2013 21 September 2012 6 September 2012 3 September 2012

AAA/Stable/A-1+ AAA ratings affirmed under the new rating criteria Aaa/Stable/P-1 Aaa/Stable AAA/Stable/F1+ 10

8,207 3,436 1,986 1,612 853 255 65 Risk Capital Sovereign Loan Risk Non-Sovereign Loan Risk Equity Risk Treasury Risk Operational Risk Available Risk Capital

Expanded capacity to withstand shocks and assume core business risks

In USD million 2008 2009 2010 2011 2012 3,365 3,431 3,377 3,600 4,108 3,814 4,002 4,047 3,893 4,100 Paid-in capital Reserves 7,179 7,433 7,424 7,494 8,207 In USD million 9,928 10,213 11,728 13,225 2,519 2,769 3,219 4,193 2.8 2.6 2.3 2.7 2.7 2008 2009 2010 2011 2012 Sovereign Portfolio Non-Sovereign Portfolio Weighted Average Risk Rating 8,896 12,447 12,983 14,947 17,418 Target rating of 3 to 4 * In USD million *Equivalent to Moody’s Ba1 to B2

Growing capital base … …allowing for greater support to Africa Capital usage focused on development activities

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Safeguarding stakeholders interests

2008 2009 2010 2011 2012 41% 60% 58% 60% 58% 2008 2009 2010 2011 2012 60% 86% 84% 55% 50%

Strong capitalization Conservative leverage Prudential Limit (100%)

Risk Capital Utilization Rate = Σ ((Exposure) x (Risk capital allocation)) / Total risk capital Usable Capital = Σ (Paid-in capital, Reserves, Callable capital of non-borrowing countries rated A- and above) Risk Capital Utilization Rate Debt to Usable Capital

Prudential Limit (100%)

Annual paid-in capital from GCI-6 will range from USD 467 million to USD 72 million from 2013 to 2023 12

7% 4% 9% 81% 0% 20% 40% 60% 80% 100%

 Our investment philosophy: capital preservation, liquidity and reasonable returns  Investment strategy adapted to market conditions to strengthen credit quality and improve liquidity profile of investment portfolio while limiting volatility of returns  Strong performance in 2012 both in absolute and relative terms

Prudence and performance in the midst of financial turmoil

As at 31st December 2012 As at 31st December 2012

Fair value portfolio: USD 5.5 billion Investment portfolio by rating Amortized cost portfolio: USD 4.4 billion Liquid assets to meet operational needs of the Bank

4% 3% 34% 44% 15% 0% 20% 40% 60%

Prudent investment strategy Defensive asset mix targeting top quality investments

62% 31% 7% 0% 20% 40% 60% 80% 100% AAA AA A or lower

Longer term assets to stabilize Net Interest Margin 13

2009 2010 2011 2012 451 1,679 1,830 1,410 132 148 224 143 Mark-to-Market Net exposure*

Financial policies that mitigate non-core risks

In USD million

Notional derivatives exposure

* After collateral received in cash or securities

+ Bank for International Settlements

In USD million

Effective counterparty derivative risk mitigation Minimizing market risk to increase lending capacity Limiting exposure to counterparty credit risk Conservative policy with minimum rating requirements of A- /A3 for derivative counterparties Exposure collateralized by cash and highly rated securities Counterparty credit risk managed in line with BIS+ standards All borrowings swapped, mapped and allocated to similar profile assets Interest rate risk minimized and currency risk not permitted under the charter Ensuring that the Bank holds at all times at least one year’s liquidity to meet cash requirements 14

2009 2010 2011 2012 21,169 22,337 23,632 22,352 Notional amount

123 141 169 137 177 251 190 159 158 150 37 44 36 13 411 375 364 295 339 2008 2009 2010 2011 2012 Allocable income Reserves Development Initiatives Surplus Account Allocable Income

Building Africa, maintaining financial strength

In USD million * 2012 income allocation subject to Board of Governors approval *

Allocating income Commitments under Special Relief Fund to respond to humanitarian relief requests Ensuring financial sustainability and resilience to shock Guiding principles of net income allocation Enhancing support to LICs Building up reserves while supporting development initiatives  52% of allocable income retained in reserves for 2012 against 46% in 2011  Goal is to maintain risk capital utilization rate below 100% limit over the 10-year planning horizon  First priority to reserves  Distribution to fulfill mandatory commitments: ADF USD 54 million and DRC USD 96 million  Surplus account with clear criteria for prioritization, use limited to high impact development initiatives  92% of allocable income after transfer to reserves will benefit low income countries Somalia USD 1 mn Drought relief USD 1 mn Comoros Support to flood victims USD 1 mn Mali Aid for the security and food crisis USD 0.8 mn Gambia Assistance to severe crop failure USD 1 mn Mauritania Help to refugees 15

 USD 3.8 billion borrowed in 2012 supporting the execution of the business plan  2013 borrowing program of USD 5.6 billion of which USD 3.2 billion raised as of April 2013

USD 57.3% EUR 40.3% ZAR 2.3% UGX 0.1%

 Strong following in the US Dollar Global market  Growing importance of the Australian Kangaroo market  Strong brand recognition and top notch ratings that draw private placement and Uridashi investors  Africa’s growth story and strong macro fundamentals drive increase in African currency-linked notes

Funding across the globe to raise resources

2012 borrowings

Borrowing program in line with growing operations Proven access to diverse market segments

Public Domestic Issues 32.7% Global Benchmarks 39.3% Private Placement Notes 19.4% Uridashi Bonds 6.9% African Currency- Linked Notes 1.6% African Domestic Issues 0.1%

Highlights for 2012

2012 issuance currencies 2012 after-swap currencies

All borrowings swapped into the Bank’s lending currencies 16

USD 2.175 billion 0.875% due March 2018

A consistent presence in the dollar global benchmark market

Distribution by investor type Distribution by region Distribution by investor type Distribution by region

2012 2013

USD 1.5 billion 1.125% due March 2017

Banks 28% Central Bank / OIs* 60% Asset Managers 12% Africa Americas Asia Europe Middle East 19% 17% 30% 14% 20% Corporate 3% Banks 23% Central Bank / OIs* 67% Africa Americas Asia Europe Middle East 11% 29% 41% 14% 5%  Priced at 33.25 bps over US Treasuries  Re-opened at 6.4 bps over the adjusted UST  Priced at 20.45 bps over US Treasuries  Latest re-opening at 12.1 bps over UST *Official Institutions

Investor base primarily composed of central banks,

• fficial institutions and fund

managers Good participation from African central banks in recent bonds, more engagement to promote the Bank’s strong credit story AfDB benchmark bonds offer safety with yield over US Treasuries and catalyze development in Africa 17

Asset Managers 7%

Diversifying funding sources through multiple markets

AUD 500 million 3.50% due January 2018 Active player in the Social Responsible Investment market AUD 1 billion 5.25% due March 2022 Responding to investor’s currency needs

March 2012 ZAR 128 Million Education Bond due March 2015 August 2012 USD 20 Million Clean Energy Bond due August 2022 January 2013 CLP 39.1 Billion Fixed Rate Note due January 2014 October 2012 MXN 800 Million Deep Discount Bond due October 2022 November 2010 AUD 63 Million Water Bond due November 2014 October 2010 BRL 29 Million Clean Energy Bond due October 2017 October 2011 VND 420 Billion Fixed Rate Note due October 2016 December 2012 USD 100 Million Fixed Rate Callable Note due December 2015 *Official Institutions Asset Managers 26% Banks 39% Central Bank / OIs* 35% Asset Managers 60%

Insurance Companies 15%

Banks 24% Central Bank / OIs* 1% Australia Americas Asia Europe Japan 15% 5% 52% 28% 24% 5% 60% 1% 10% Jan-18 Mar-22

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A natural issuer of African currency-linked bonds

Over USD 180 million issued since 2012 in Nigerian Naira, Uganda Shilling and Ghanaian Cedi

 Favorable growth story and macroeconomic fundamentals  Triple-A rating enables the Bank to be an issuer of choice for emerging market investors  Providing visibility to African countries among international investors  Investors looking into Africa for opportunities Strong strategic interest Selected AfDB African currency-linked transactions

March 2013 GHS 68.25 Million due March 2018 April 2012 NGN 2.36 Billion 10.5% due April 2014 February 2013 GHS 75 Million 14.0% due August 2015 December 2012 UGX 34.892 Billion 10.0% due Dec 2017 November 2012 NGN 2.612 Billion 10.5% due Nov 2013 October 2012 NGN 786.25 Million 11.5% due October 2013

Key drivers Prior transactions in African currencies 19 TZS BWP ZMK KES

Multi-pronged approach to developing African capital markets

 Establishing local bond issuance programs  Targeting selected African capital markets

The success of the Bank’s experience in Uganda sets the stage for further local market issuance in 2013

 ISDA+ Master Agreement signed with the International Finance Corporation to facilitate local currency lending and bond issuance in Africa  Enables bilateral collaboration on local currency issuance, enhances local currency funding capacity to support development projects

+ International Swaps and Derivatives Association

Major breakthrough in the capital markets of Uganda Exploring domestic African capital markets Expanding the Bank’s African lending currencies Partnering with sister institutions

Ghana Kenya Nigeria Tanzania Zambia

NGN XOF ZAR XAF GHS UGX ZMW TZS EGP KES Ugandan Shilling designated as one of the Bank’s lending currencies in September 2011 Fully placed domestically with 50% oversubscription Bond proceeds kept in local currency to fund a domestic mortgage lender Established a UGX 125 billion Medium Term Note program Issued a 10 year, UGX 12.5 billion bond in July 2012, with coupon pegged at 85% of Uganda 2-year Treasury bond yield and to be re-priced at 2-year intervals 20

Strengthening the capital markets infrastructure and database

AFMI website : www.africanbondmarkets.org Single-stop knowledge tool providing information on African debt markets Recent Achievements African Financial Markets Initiative Reduce dependency on foreign currency denominated debt & enlarge investor base Finance enhancement of domestic bond market Infrastructure Work with partners and African central banks to develop debt markets in the continent Post regular updates, providing relevant and current information Enhance data collection and management capabilities Improve availability, quality and usefulness of information

• n African debt markets

African Domestic Bond Fund African Financial Markets Database Hosting Pan-African Stakeholder Workshop on Local Currency Bond Markets Creation and launch of the AFMI website – a knowledge management tool to bring visibility and awareness of African debt markets Creation and launch of the African Financial Markets Database, which covers Treasury Bills and Treasury Bonds data of 40 countries Capacity building of Central Bank Liaison Officers involved in the data collection for the creation of the African Financial Markets Database 21

3 Promoting Africa’s economic transformation

“The Bank’s overarching goal in the next decade is to support Africa’s ambitions to unlock the continent’s internal potential for a stable, integrated, competitive, diversified and growing economy—in short, to become the next emerging market. This is what Africa wants, and this, I believe, is what Africa will achieve.” Donald Kaberuka 22

Key principles for African economies

Growth must be shared, enhance productivity, add value, support innovation and competiveness, ease pressure

• n natural assets, while better

managing environmental, social and economic risks Logistical and policy impediments to economic integration at the national, sub- regional levels, and by implication into the global economy, must be addressed Success comes from leadership that has vision and capacity to implement its program Political leadership STRUCTURAL TRANSFORMATION Quality of growth and inclusion Integration and interconnectedness 23

Drivers of transformation

Technology and ICT Innovations Investing in ICT for public access to information, spurring a knowledge economy and innovative approaches to micro-finance and the mobilization

• f rural producers. This is to revolutionize trade on

the continent Urbanization Urban concentrations of population allow for specialization—via industry clusters and economies of scale—enhancing productivity and export competence Natural Resources Continuing strong global demand for energy, minerals and agricultural commodities will offer new opportunities for growth Private Sector Governments must remove existing obstacles to formal firms, while ameliorating conditions for the informal sector Infrastructure Bridging the infrastructure gap could increase Africa’s GDP growth rate an estimated 2% a year Governance / Investment Climate Shifting in trade and capital flows to and from Africa are game-changing, and emerging economies, such as the BRICs, are influencing Africa’s growth Demographic Dividend Take advantage of expanding middle class to create opportunities for investment in consumer goods industry, modern agriculture and service industries, with potential for employment creation Climate Change Climate change as crosscutting issue to limit impact on agricultural productivity, food and water security, disease control, bio-diversity, and land degradation Agriculture Promoting agriculture will be the most effective way of driving inclusive growth and poverty reduction in Africa while ensuring food security 24

Five core operational priorities

Fragile states Agriculture & food security

 Infrastructure development  Regional integration  Private sector development  Governance & accountability  Skills & technology

Gender A ‘continuum’ & regional approach Supporting value chains Economic empowerment Legal & property rights Two objectives to support transformation Three areas of special emphasis

Inclusive growth Transition to green growth

Bank Group at the heart of Africa’s transformation

25

2008 2009* 2010 2011 2012 1,121 3,688 2,063 2,869 3,394 1,733 2,707 1,795 1,991 1,798 ADB Disbursements * ADF Disbursements **

Financing solutions to Africa’s challenges

Infrastructure that unlocks the growth and development potential

• f Africa remains key

* A year of exceptional demand for Bank Group resources due to the global financial crisis ** Including loans, grants, equity investments, emergency operations, HIPC debt relief, loan reallocations and guarantee, Fragile States Facility

Focusing on interventions aligned to Africa’s priorities

In USD million

Promoting social & human development by focusing on skills development and science & technology for job creation Multisector operations which broadly cover public sector management and poverty reducing budget support, bear closely on the success of other interventions Providing resources to financial intermediaries Continuing interest in rural development and actions to combat poverty through increased approvals for agriculture and rural development Delivering vital resources for scaling up access to safe water and sanitation

2,853 6,394 3,859 4,860 5,191

Field presence & streamlined business processes at work: 6% increase in disbursements

Energy 24.7% Transport 16.8% Social 14.6% Multisector 14.0% Finance 11.2% Agriculture 8.6% Water Supply & Sanitation 7.5% Industry 2.7%

26

Powering the infrastructure that drives growth

Water USD 452 million Energy USD 1.37 billion Africa’s Priority Action Program (2012-2020)  Africa’s infrastructure financing requirements, mostly for power and energy, in the USD trillions in the longer term  About 30 countries affected by chronic power problems  Transportation costs increase the price of African goods by 75%  Poor infrastructure depresses productivity in fragile states by an estimated 40%.  The continent invests only 4% of GDP on infrastructure, compared with 14% in China Africa’s infrastructure needs remain substantial Infrastructure development as a key enabler of regional integration USD 2.7 billion  Promoting regional economic integration  Reduction in energy costs and increasing access  Reducing transport costs  Enhancing water and food security  Boosting ICT services and connectivity Innovative financing Projects Transformational infrastructure connecting African roads, railways,

• il and gas pipelines, power networks, and ICT

Program for Infrastructure Development in Africa (PIDA) estimated at USD 360 billion by 2040  51 immediately actionable programs, including the 40,000 MW Inga power plant in DRC, promoting regional integration  Africa Infrastructure Finance Facility will bring additional resources and capacity to the continent  Green Africa Fund focusing on adaptation to climate change 27

Designing an innovative solution to the infrastructure challenge

ACTIVITIES/SERVICES INVESTOR UNIVERSE  Flexibility and the ability to respond to sponsors in a timely manner  Political support and influence to move projects forward and overcome political obstacles  Coordination of African stakeholders:

• Guidance, sponsorship and a close working relationship

with the AfDB

• Broad support from African nations as participants and/
• r investors
• Mobilization of resources from African capital markets

and Central Banks  Provision of substantial financial and technical resources  Expertise to effectively interact with world class, private sector project developers DELIVERY Africa Infrastructure Finance Facility to assist projects at all stages CREDIT EQUITY ADVISORY African Private-Sector/ Financial Institutions AFDB and Other Development Partners International Capital Markets and SWFs* African Central Banks/ Capital Markets 28

* Sovereign Wealth Funds

On the road to interregional mobility and trade

Lomé-Cinkansé-Ouagadougou CU9 Corridor (USD 270 million) Nacala Road Corridor Phase III in Mozambique and Lusaka in Zambia through Malawi (USD 60 million) Bamako-Dakar Corridor Road Improvement and Transport Facilitation Project Recognizing that an effective transport corridor requires more than just a road  Construction of a road with a radio communication system  Scanners to speed border crossing times  Axle scales along the corridor  Road safety and disease transmission awareness  Meeting needs of local communities U.S. Treasury Department‘s Development Impact Honors Award in June 2012 Spatial inclusion in Southern Africa Priority highway connecting WAEMU countries 34 million people with improved access to transport Rehabilitation of 150 km of road in Togo and 153 km in Burkina Faso Increased transit traffic and trade from 1.56 to 1.91 million tonnes in 2016 Reduced general transportation costs Creation of jobs for youths and women Improved road safety Benefit directly around 525,000 people with improved transport links, social facilities, and job

• pportunities

Benefit also traders and road users, who transport goods between Zambia, Malawi and Mozambique Help Mozambique reduce its infrastructure gap by improving national and regional connectivity 29

Rural Water Supply and Sanitation Initiative

Addressing Africa’s water and sanitation needs

USD 452 million approved in 2012 to scale up access to safe water and sanitation, promoting innovative technologies, and supporting knowledge management activities in RMCs The Africa Water Vision for 2025 Strengthening governance

• f water resources

Improving water wisdom Meeting urgent water needs Strengthening the financial base for the desired water future USD 4 million grant from the African Water Facility for water provision in the Darfur region  Provided water supply to 56 million people and sanitation access to 41 million people since 2003  Accelerate access to drinking water supply and sanitation in rural Africa to attain the African Water Vision of 2025 and the MDG targets  6 projects approved in 2012 for a total amount of USD 83 million across the Gambia, Chad, Liberia, CAR, Djibouti and Mauritania  Initiative of the African Ministers’ Council on Water, administered by the Bank  Established to help countries achieve the objectives

• f the Africa Water Vision of 2025

 75 operations approved amounting to USD 118 million since 2006  6 projects approved in 2012 for a total amount of USD 12 million African Water Facility 30 Equitable and sustainable use and management

• f water resources

Access to modern power for at least 1.5 million households across 7 countries made possible through 6 operations totaling USD 1.35 billion in 2012

Embracing a lower carbon and green growth path

 Additional 1,588 MW of generation capacity  More than 10 million tonnes of CO2 emissions avoided each year MOROCCO Ouarzazate Concentrated Solar Power (CSP) Plant (USD 315 million)  160 MW of CSP capacity  Curb CO2 emissions by 240,000 tonnes Integrated Wind/Hydro and Rural Electrification Programme (USD 572 million)  750 MW of wind & 520 MW of hydro capacity  3 million tonnes of CO2 emissions avoided each year  86,000 new rural households connected Interconnection of power grids from the Boali hydro-power system (USD 53 million)  38 MW hydro capacity  5,000 new households connected  Cost of electricity will be reduced by at least 10% CAR-DRC ETHIOPIA-KENYA Electricity Highway (USD 341 million)  1,000 km of transmission line with capacity of 2,000 MW  7 million tonnes of CO2 avoided each year  1,400,000 households will benefit from reliable and affordable electricity by 2022  Selected by the G20 as an exemplary regional project  First project of its kind to be registered as a CDM project Itezhi-Tezhi hydro power and transmission line (USD 55 million)  120 MW hydro capacity  360,000 tonnes of CO2 emissions avoided each year  60,000 new households connected ZAMBIA Rural Electrification (USD 15 million)  5,100 households connected  Overall electrification rate up to 50% in 2016 from 16% in 2011 CONGO 31

Investing in people: one billion opportunities

AfDB supports universities and regional centers of excellence 20 to 25% unemployment across Africa vs. 9% worldwide Youth account for about 60%

• f the unemployed

Number of university graduates in Sub-Saharan Africa more than tripled (1999 to 2009) but funding increased more slowly hindering educational quality Most of underemployed young are in low productivity household enterprises or the informal economy Building skills and raising employability more pertinent than ever USD 807 million approved in 2012 focusing on skills and entrepreneurship in higher education, science and technology, in close partnership with the productive sectors and using modern technologies Ghana Malawi Kenya Uganda Tunisia Contributing to Africa’s education over 2010-2012  Over 4 million students and scholars reached  4,501 classrooms and educational support facilities constructed/rehabilitated  Over 10 million textbooks and teaching materials supplied  Over 56,000 teachers and other staff recruited/trained  Over 656,000 students newly enrolled Job-creating growth Skills development Development of safety nets to protect against economic and social shocks AfDB’s Human Capital Strategy for Africa to transform teaching, learning, & health services for one billion Africans (2013-2017) 25% of the 25-34 with higher education is unemployed;

• ne-fifth is employed in the

informal sector Giving voice to all citizens for improved quality of public services and efficiency of public spending 32

Recognizing the primacy of the private sector

Strengthen the laws, policies, tax systems, rights, regulations and procedures that govern business

• I. Improving Africa’s investment and business climate

Finance small businesses using a variety of channels and ways of lending

• III. Enterprise development

Finance infrastructure and will significantly leverage its resources to ‘crowd-in’ private investment

• II. Access to social and economic infrastructure

AfDB Private Sector Development Strategy: An engine of economic growth and poverty reduction

• n the Continent in the next decade and beyond

To be delivered through sovereign and non-sovereign lending plus analytical and advisory services 70% of investment 75% of economic

• utput

90% of formal and informal employment One dollar of the Bank’s money brings in a further six Weak government regulation Poor infrastructure Severe skill shortages and mismatches Trade restrictions Access to medium and long-term finance Obstacles to growth throw a spanner in the works

The private sector generating African growth and development

33

Enabling socially responsive enterprises

Gabon Fertiliser Company Project (USD 150 million)  Diversify economy away from oil exports  Promote industrial development and local processing industries  Productive use of gas currently being flared into atmosphere  Increase agricultural output and ensure food security

Middle Income Countries 45.3% Regional 35.0% Low Income Countries 19.8% Financial Services 60.9% Infrastructure 25.9% Industry Services 13.1% Social Services 0.2%

Supporting efforts to tackle major developmental challenges Incorporating green growth into the private sector agenda Building regional as well as national economies… … and developing sectors that facilitate trade and investment USD 1,157 million approved in 2012 for 21 new projects and additional financing for two existing operations 34

2008 2009 2010 2011 2012 Loans Equity Investments Guarantees In USD million 1,389 1,815 1,863 1,334 1,157

Sowing the seeds for productivity and food security

Drought Resilience and Sustainable Livelihoods Programme in the Horn of Africa Contributing to Africa’s agriculture sector (2010-2012)  4,937 rural facilities constructed/rehabilitated  Over 1.5 million livestock provided/vaccinated  Over 2.8 million plants introduced  4,581 community-based projects executed First phase in 2013 to focus on Djibouti, Ethiopia, and Kenya Response to the Food Crisis in the Sahel Programme  Targeting 800,000 small farmers who provide 90%

• f the food needs in the region

 USD 351 million programme to restore food security covering 12 countries USD 587 million approved in 2012 for 18 operations covering 16 countries Livelihood interventions Climate change adaptation Building rural infrastructure Disaster risk reduction measures Agriculture employs 65-70%

• f the African workforce

Strengthening capacity for the delivery of agricultural services Rehabilitation of agricultural infrastructure Construction of access and feeder roads Market infrastructure and storage facilities Support to climate change adaptation measures Food security Improved water control & distribution systems Increased productivity & income for agro-pastoralists Improved road networks Development

• f agro-industry

& market infrastructure Enhanced regional cooperation & coordination Accounts for roughly a third of the continent’s GDP Women make up more than half of Africa’s farmers and produce up to 90% of the continent’s food Promoting agricultural production a way to drive inclusive growth and reduce poverty Africa is the only continent where per capita food production has declined over the past 30 years 35

Strengthening accountability and transparency

Strengthening public financial management systems Promotion of sound macroeconomic management Governance of natural resources USD 750 million approved in 2012 for 42 operations across 22 countries Restoration of Fiscal Stability and Social Protection budget support programme (USD 40 million)  Alleviating foreign exchange shortages  Promote fiscal and macro-economic stability  Protect social spending  Macroeconomic management improved: low budget deficits and realistic and stable exchange rates  Tax revenue has risen from 10.5% to 14.7% of GDP  Time to start a business halved & time for contract enforcement fallen by 50 days  Support to RMCs to improve natural resource governance across value chain, including EITI in 8 countries in 2012 Sound climate for business and investment Sustaining Malawi’s reforms to stabilise the economy Program based

• perations

Institutional support program Analytical and advisory services Quality of governance critical to development Complex commercial transaction negotiations Capacity building Combating vulture funds USD 5.23 million approved in 2012 across 11 projects in Burkina Faso, Djibouti, DRC, Ghana, Guinea, Kenya, Tunisia and Zambia

Hosted by the AfDB

36

Responding to the needs and challenges of fragile states

USD 180 million approved in support of 17 fragile states in 2012 USD 18 million over 4 years for the Matotoka-Sefadu Road Rehabilitation Sierra Leone Capacity Building support through Public Financial Management Somalia USD 25 million for the Capacity Building for Public Finance and Economic Management Zimbabwe BEFORE AFTER Support for public finance management has helped restore fiscal discipline Helping Liberia become the first African country to comply with the Extractive Industries Transparency Initiative One of the first partners to provide Liberia with much needed budget support after the end of conflict Extension of the automated system for customs data to help increase revenue collection at 3 ports from around USD 4 million monthly to USD 10-12 million and reduced clearance of goods at ports from 60 to less than 10 days  Rehabilitated 130 km of roads, reducing travel time from days to hours and giving access to previously unreachable schools, health centers, and markets  USD 50 million for further upgrade to an all-weather paved road BEFORE AFTER 200 million people, 50% with less than $1.25 a day, 50% higher rates of malnutrition, 20% higher child mortality and 18% lower primary completion rates 37 AfDB is Liberia’s partner: Results achieved on the ground Yet to achieve a single MDG 80% of fragile states are in Africa

Positioning closer to stakeholders

= Regional Resource Center

Demand for field presence is growing  Presence in 34 countries  36% of operations staff work from the field  42% of projects managed by field offices Decentralization with delegation & safeguards 38 Strengthened decision making authority Expanded presence in fragile states with the new South Sudan Country Office Opening of Customized Liaison Office in Mauritius and Asia External Representation Office in Tokyo Plans to establish customized field presence in Congo Brazzaville, Equatorial Guinea, Mauritania, Djibouti, Eritrea, Benin Guinea (Conakry), Niger and Somalia in 2013  Better integration and oversight  Proactivity and responsiveness  Reduced procurement turn- around time  Better utilization of resources  Reduced costs of doing business

Japan

Tunisia (TRA) Egypt Uganda Malawi Ghana South Africa Madagascar Gabon Mali Nigeria Tanzania Zambia Algeria Ethiopia Sudan Kenya Chad Angola Zimbabwe Burundi Togo CAR Ivory Coast (HQ) South Sudan Mauritius Mozambique Liberia Cameroon Burkina Faso Senegal Sierra Leone Rwanda DRC Morocco

The trusted partner for Africa’s development

“…the best advocate for Africa in achieving the MDGs.” Her Excellency Ellen Johnson Sirleaf, President of Liberia, 2013 “African Development Bank has become the darling

• f all of us in Africa.”

His Excellency Olusegun Obasanjo, Former President of Nigeria, 2012 “Nous sommes confiants que cette institution saura, grâce à la mobilisation de toutes ses compétences, préserver ses acquis et assurer son avenir avec plus d'optimisme et avec davantage de rayonnement à l'échelle continentale et internationale.” His Majesty Mohammed VI, King of Morocco, 2012

Her Excellency Ellen Johnson Sirleaf President of Liberia His Excellency Olusegun Obasanjo Former President of Nigeria His Majesty Mohammed VI King of Morocco

“AfDB has been Africa’s dependable partner in development since its establishment in 1964.” His Excellency Jakaya Mrisho Kikwete, President of Tanzania, 2012

His Excellency Jakaya Mrisho Kikwete President of Tanzania

39

www.afdb.org afdb@afdb.org Investor Contact: FundingDesk@afdb.org (216) 71 10 39 00 (216) 71 35 19 33

For more information

 Financial and Operational Analysis  Documentation for Debt Programs  Rating Agency Reports  Financial Products for Borrowers  Annual Report

afdb_acc AfDB_Group African Development Bank Group

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Appendix

4

41

AfDB: Income statement (UA million)

Year Ended 31 December 2012 2011 2010 2009 2008

Operational Income and Expenses Income from Loans 351.16 314.92 293.36 288.24 352.28 Income from Investments and Related Derivatives 197.65 168.85 219.22 222.96 202.88 Income from Others Debt Securities 4.83 5.41 6.74 7.68 9.29 Total Income from Loans and Investments 553.64 489.18 519.32 518.88 564.45 Interest and Amortized Issuance Costs (356.41) (316.82) (303.04) (306.32) (251.83) Net Interest on Borrowing-Related Derivatives 139.16 112.16 126.27 73.28 (65.79) Unrealized Gains/(Losses) on Fair-Valued Borrowings and Related Derivatives (30.45) (13.00) (27.61) 17.38 12.43 Unrealized Gains/(Losses) on Non Fair-Valued Borrowings and Others 20.28 9.96 (13.33) (20.30) (16.68) Provision for Impairment on Loan Principal and Charges Receivable (29.69) (17.68) (26.76) (11.29) 163.28 Provision for Impairment on Equity Investments (0.05) (0.15) (0.90) (2.32) (18.46) Provision for Impairment on Investments 0.29 6.39 18.58 3.39 (38.13) Translation (Losses)/Gains (2.27) (27.95) 4.87 19.63 (9.17) Other Income 15.29 4.46 (1.72) 7.34 18.65 Net Operational Income 309.79 246.55 295.66 299.67 358.75 Administrative Expenses (104.64) (79.50) (75.00) (63.06) (46.78) Depreciation – Property, Equipment and Intangible Assets (4.59) (4.47) (4.59) (4.68) (5.20) Sundry (Expenses)/Income (1.94) 1.93 (2.41) (0.77) (2.11) Total Other Expenses (111.17) (82.04) (82.00) (68.51) (54.09) Income Before Distributions Approved by the Board of Governors 198.62 164.51 213.66 231.16 304.66 Distributions of Income Approved by the Board of Governors (110.00) (113.00) (146.37) (162.68) (257.30) Net Income for the year 88.62 51.51 67.29 68.48 47.36 1 UA = 1 SDR = 1.54027 USD (2008) = 1.56769 USD (2009) = 1.54003 USD (2010) = 1.53527 USD (2011) = 1.53692 USD (2012)

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AfDB: Balance sheet highlights (UA million)

1 UA = 1 SDR = 1.54027 USD (2008) = 1.56769 USD (2009) = 1.54003 USD (2010) = 1.53527 USD (2011) = 1.53692 USD (2012)

As at 31 December 2012 2011 2010 2009 2008

Assets Due from Banks 881.45 344.16 395.72 318.83 592.64 Demand Obligations 3.80 3.80 3.80 3.80 3.80 Treasury Investments 6,487.51 7,590.47 7,433.53 7,412.25 4,575.76 Derivative Assets 1,558.33 1,696.68 1,421.48 764.00 736.09 Non-Negotiable Instruments on Account of Capital 1.97 3.04 4.62 8.19 11.86 Accounts Receivable 762.67 914.85 1,341.66 924.16 649.01 Outstanding Loans 11,014.31 9,373.52 8,293.01 7,538.20 5,834.62 Hedged Loans- Fair Value Adjustment 86.85 49.87

• Accumulated Provision for Impairment on Loans

(128.51) (118.03) (114.21) (101.92) (102.64) Equity Participations, Net 438.56 309.76 272.24 234.48 188.78 Other Debt Securities 76.54 79.99 79.75 70.81 68.80 Other Assets 31.06 13.34 12.69 11.89 12.23 Total Assets 21,214.55 20,261.45 19,144.29 17,184.69 12,570.95 Liabilities, Capital and Reserves Accounts Payable 2,083.07 1,974.68 2,015.04 1,385.68 843.12 Derivative Liabilities 512.60 502.29 328.30 477.12 360.30 Borrowings 13,278.80 12,902.96 11,980.56 10,580.64 6,707.28 Capital Subscriptions Paid 2,839.48 2,505.97 2,355.68 2,350.26 2,345.81 Cumulative Exchange Adjustment on Subscriptions (166.83) (160.63) (162.57) (161.97) (161.03) Reserves 2,667.44 2,536.18 2,627.28 2,552.96 2,475.47 Total Liabilities, Capital and Reserves 21,214.55 20,261.45 19,144.29 17,184.69 12,570.95

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